When the temperature starts to rise and the days lengthen, spring is clearly upon us. For many people, the changes of the season, from Winter to Spring, inspires them to declutter and spring clean their homes in preparation for the warm, sunny months ahead. This year why not also take the opportunity to give your finances a thorough dusting down, to ensure they are also in good shape for Summer and beyond? Here are a few tips to help you do it:
1. Sort out your financial filing
Whether you get most of your financial information electronically, or you still get some in paper form, spending a little time organising it and creating a financial filing system is a fantastic way to get started. Not only will you know where everything is when you need it, also use the opportunity to make a note of when insurance policies and utility contracts are up for renewal so you can shop around for better deals. You should also review whether your savings are in the best place, and remind yourself about the interest rates you are paying on credit cards, mortgages, finance and loans, so that you can see if they can be improved upon by changing lenders. As well as decluttering your inbox or wherever you put paper copies, this little exercise will help you develop a clearer picture of your finances and help you to feel in control of your money.
2. Review your standing orders, direct debits, and auto-renewals
A staggeringly large number of people pay standing orders, direct debits, and auto-renew subscriptions each month which are either out of date or for things they no longer need/use. Go through the last few months of your bank statements and check if all the automated payments you make are still relevant. If they are not, then cancel them! Gym memberships are a common thing that people pay for, but never use, and so are subscriptions for things you received a free trial for, but then forget to cancel! Be ruthless. If you think you might use the product, service, or subscription in a few months’ time, then cancel it now and resubscribe when you need it, rather than wasting your money in the meantime.
3. Create or update your budget
If you don’t have a budget, then create one. If you do have a budget, then update it as costs and spending change over time! A budget allows you to see what money you have coming in each month, and where it goes. It helps you take control of your finances and is the best way to help you reduce spending, clear debt, or save money. There are lots of budgeting tools and advice available online, but a budget doesn’t need to be complex. It is essentially a list of the money you have coming in each month, and where that money goes. By splitting your outgoings into essentials (those things you must pay, such as rent/mortgage, utility bills, food, debt repayments) and your discretionary spending (those things you spend money on which are not essential), you create a clear picture of your finances.
4. Deal with debt
Debt can hang over some people like a storm cloud on a sunny day. However, by creating a clear picture of your finances by sorting out your financial filing, and making, or updating, your budget, debt doesn’t need to spoil your summer.
Build debt repayments into your budget and, if you have spare money after your essential bills have gone out, try to pay off more towards your debt, do so as it will save you money in the long run and clear your debt more quickly. Paying just a little above the minimum payment required can save you a huge amount in interest payments.
Also, always ensure you make debt repayments on time to avoid additional charges, and shop around to see if you can get better credit card, loan, and mortgage interest rates, to reduce your cost.
Whilst credit can seem like a great way to have what you want or need now, you always have to be able to afford to repay it.
Debt is a major cause of stress and anxiety for some people. If you are struggling with debt, please do not ignore it as it won’t just miraculously disappear. Speak with your lenders, who may be able to provide help and advice, or contact one of the many free sources of debt advice and support you can find on the internet. If debt is impacting your mental health, please also seek help from a medical professional, as even just talking about it can make the burden less. Also, speak with friends and family about your debt concerns, as they may be able to help and support you.
5. Save: for good times and bad
Having money put aside for the unexpected, or to pay for something nice in the future is a great position to find yourself in. However, it doesn’t happen by accident. When you have your budget in place, and have addressed any debt you have, put any remaining cash each month into a savings account. If you don’t have money remaining each month, look at ways to reduce your outgoings by shopping around for better deals on things such as insurance, or changing your discretionary spending habits to free up money to save. Some people try to adopt the 50/30/20 approach to their money, where 50% of their income covers their essential costs, 30% their discretionary spending, and 20% goes to savings. If you can achieve this, then great. If you can’t, then don’t worry. Every Euro you can put away each month is a plus! A good initial target to aim for when saving is to create a fund that is equal to three months of your essential spending. This provides a financial buffer if you lose your job, fall ill, or one of life’s pleasant, or unpleasant, surprises occurs. However, there is nothing to stop you creating other savings “pots” for things such as a holiday, moving home, starting a family, or buying a new car!
Setting up an automatic transfer to a savings account straight after you get paid is a useful way to get into the discipline of saving, as is transferring amounts into savings that you save by cancelling outdated automatic payment in your bank account (as discussed in tip 2). These both tap into one of the secrets of successfully saving: it is easier if you don’t miss the money you save each month.
The comfort you gain from knowing you have money available if, or when, you need it, can be a powerful motivator to keep saving. It is just a case of starting.
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